That’s the title of Holman Jenkins’ WSJ column today and it’s essential reading. He observes that moral hazard created by federal policies, such as “the two giant S&Ls called Fannie Mae and Freddie Mac” (a useful way of looking at this; Jenkins acknowledges that former Rep. Jim Leach first used that formulation) were necessary to the whole financial debacle.

That’s the point that interventionist politicians and intellectuals can’t bring themselves to admit. The market does not create moral hazard. The government does.

Jenkins concludes: “And note a crowning irony: Last week Chinese officials reported instructed the country’s banks and fund managers to avoid US assets except those like Fannie and Freddie where US taxpayers take the losses. The crisis isn’t over, and increasingly has little to do with excessive enthusiasm for housing. It’s the crisis everywhere of the welfare state, of promises made that are beyond the power of governments to keep — beginning perhaps with sad sacks like Greece but ending with Japan and the US, which remain central to the global economy.”